Bernie Sanders, Sweden and New Zealand

I survived socialism. So it’s always surprised me that Bernie Sanders is fond of saying America should look more like Scandinavian countries such as Sweden. Because what’s made Sweden the success it is on many of the metrics Sanders loves to point to aren’t the policies Sanders espouses. On the contrary, the reforms he wants for America are what Scandinavian countries and my home country of New Zealand tried and abandoned long ago, because they led to economic misery for us all.

In this month’s Reason Magazine, Johan Norberg writes at length about the experience of Sweden.

“Sweden and the other Scandinavian countries have experimented with very big government and semi-socialist ideas. There’s just one problem: That experiment coincided almost perfectly with the region’s only sustained period of economic decline over the last 100 years.”

Prior to socialism, when the country was very laissez-faire, Norberg notes:

“Swedish income per capita increased eightfold as the population doubled. Infant mortality fell from 15 to 2 percent, and life expectancy increased by a whopping 28 years. And all this happened before the welfare state was even a glint in the taxman’s eye.”

He explains that Sweden embraced socialism even more fervently than its Scandinavian neighbors:

“[A]s a result its economy fell more steeply…In 1970, Sweden was 25 percent richer than the OECD average. Twenty years later, the average had almost caught up with us. Once the fourth richest country on the planet, Sweden was now the fourteenth.”

It was much the same story in New Zealand. At the start of the 20th century, New Zealand boasted the highest per capita income in the world. In 1965 it had already started its decline, but was still the sixth most wealthy country per capita. As the government grew and grew, it fell to 19th by 1980.

New Zealand Socialism
New Zealand adopted socialism earlier than Sweden and reaped the results. Some have quipped that New Zealand’s version of socialism was taken as far as you can without becoming communist. By the 1970s, the Kiwi government owned all manner of things, including, but not limited to: one of the largest hotel chains in the country; both television channels (we only had two until 1989); two banks; a steel mill and a publishing house; the country’s major airports; and, the telecommunications, electricity, airline, train and ferry companies.

What the New Zealand government didn’t own it regulated extensively. Tariffs on cars were so high that car manufacturers wanting to avoid them had to build plants in a country of barely 3 million people, a completely uneconomic proposition. A new car in New Zealand cost upwards of two and a half times the price of the same model overseas. The end result was that only the wealthy could afford new cars.

“If you can bear to, take your minds back to the late 1960s and 1970s. There was an abundance – of limited choice. Blanket foreign exchange controls, high tariffs, tight import quotas. No new cars for ordinary people. No weekend shopping. Queues to get mortgage finance. Too few licensed restaurants to matter. Union strikes a matter of course during school holidays. Monopolies everywhere.”

Norberg spells out the results of Bernie’s socialism in Sweden, which were much the same in New Zealand:

“It was a disaster for entrepreneurship and employment. During this time, not a single job was created in the private sector (on net), despite a growing population. As of 2000, just one of the 50 biggest Swedish companies had been founded after 1970.”

New Zealand began to abandon its socialist ways in 1984, before Sweden, which Norberg noted happened six years later:

“[I]n the early 1990s Sweden began to abandon its brief detour into Bernienomics. It deregulated, privatized, reduced taxes, and opened the public sector to private providers. The two decades that followed saw real wages increase by almost 70 percent.”

The Swedish Education Model
Surprisingly Norberg makes no mention of one of Sweden’s biggest reform successes, the education sector, a subject dear to Bernie’s heart. In 1993 it introduced school choice and a voucher system. The then head of the Swedish education ministry that implemented the reforms, Odd Eiken, visited New Zealand in the mid-1990s to explain the reforms. The central premise is that schools in Sweden are funded based on the number of students they enroll.

More than 20 years on and the reforms have been maintained by both left wing and right wing governments, and supported by teacher unions and teachers. Contrary to critics’ expectations, poorer Swedes have been shown to choose independent schools at higher rates than affluent families.

Swedish Health Care
Norberg also doesn’t discuss the reforms Sweden’s health care system underwent in the 1990s. These were needed after the country’s failed 1970s experiment to eliminate private providers, something that of course is near and dear to Bernie’s heart. Quality suffered in the nation’s public hospitals, primarily as a result of the need to ration services through the use of waiting lists. The “Stockholm Model”, adopted in the early 1990s introduced free market reforms which resulted in a 20% reduction in waiting lists within a year of its introduction and today private companies provide around 20% of the country’s public hospital care (up from 0%) and 30% of its public primary care.

With the exception of a school voucher system, the free market reforms New Zealand led were remarkably alike and bore similar results. (Belatedly, New Zealand has in recent years introduced a charter school system, strongly supported by Maori and other underprivileged families.)

One final thing Norberg notes is that Sanders’ “soak the rich” approach also differs from Sweden’s tax policy.

“The [left of center] Social Democrats knew all along that they couldn’t fund such a generous government by taking from the rich and the businesses—there are too few of them, and the economy depends on them too much. So Sweden and Denmark take in lots of revenue via highly regressive value-added taxes at a normal rate of 25 percent of sales—the only tax where the rich and poor pay exactly the same amount in kronor. On the other hand, the corporate tax is just 22 percent…compared to the U.S. rate of 35 percent.”

If Bernie Sanders really supported Swedish- and New Zealand-style policies that have lifted up both countries from the depths of economic gloom, he’d be campaigning to the right of Hillary Clinton, in much the same space her husband won and retained office. Instead, Sanders is referring to the failed policies of the 1970s that both countries have long since abandoned.

Comments

Not sure you are right about the Japanese cars in NZ. The clapped out old bombs that used to infest our roads in the 70s and early 80s weren’t Japanese but British and Australian (when my parents arrived in the 60s, their first car was crank-started and I recall a more recent model having a two pane windscreen with a frame down the centre). The 2nd hand Japanese cars started entering the country as a result of the 80s liberalization and was a vast improvement on our road fleet.

We still import a lot of second-hand Japanese cars – to our benefit! Japan’s regulations have the effect of pushing perfectly good five-year-old cars off the road. Since they’re the wrong side of the road for America, they wind up in NZ or Oz. I

Nick. You might want to get some verification on some of the “facts” referenced here about Scandinavia. I’ve only lived in Denmark (not Sweden) but in general I think it’s fair to categorise all the Scandinavian countries as socialist. I’m sure socialism can be defined many ways, but certainly the Scandinavians prescribe to a much more distributed wealth model (less extremes at the top and bottom). Individual taxes on the wealthy are pretty brutal, and the state plays a much greater role in daily lives of the public than the likes NZ or the UK (and I assume the US too although I’ve not lived there to verify that).

Mike – yes, agree there are varying degrees of socialism. For example, today’s Venezuela vs. Scandinavia in the second half of the 20th century. The point I’m making here is that Sweden in particular has abandoned the socialist experiment it underwent in the 1970s. Its reforms and policy direction since the 1990s have very much been a free market odyssey. How else to characterize one of the the world’s purest school voucher programs, for example? As for taxes, this decade Swedish governments have reduced taxes substantially, from 52 to 44 percent of GDP, and abolished taxes on gifts, inheritance, wealth, and housing. This isn’t the agenda Sanders is proposing!

Socialism is Govt. Monopoly Capitalism, and while Sweden can be called “socialistic”, in Social Democratic Sweden it was accepted with pride already 70 years ago, that it relies on (private) capitalism to finance its welfare policies.
So, mixed capitalist Sweden is “socialist” only in the sense of being “socially concerned” – and does that not apply to all democratic politicians and economists everywhere ?

If Sanders and Trump reflect widening “Middle America” disillusion by the status quo, then that can only happen because of an absence of vision and leadership from the center of the traditional wealth ownership patterns based political spectrum, where the center between plutocracy and communism is clearly identified by at least a minimally meaningful level of personal wealth ownership (say at potential home ownership value) by all citizens eventually.

This can be successfully initiated by building a personal (retirement) capital savings rate into our taxation system (through the NZ Super Fund in NZ), and with the existence of savings potential records on all citizens, both recent American housing policy debacles could have been prevented by responsible financing organizations.